[NEW YORK] Advertisers just aren't that into Twitter Inc. That's the conclusion of RBC Capital Markets Analyst Mark Mahaney, who downgraded shares of the micro-blogging social media network to 'underperform' and lowered his price target to US$14 from US$17.
The move was based on a proprietary survey performed by RBC that found that, for the first time, more marketing departments plan to decrease their ad spending on Twitter than plan to increase.
The stock closed at US$18.22 in New York on Thursday, 0.7 per cent higher on the day, but then proceeded to tumble in the after-hours session as news of the downgrade hit the wires.
As if Twitter's underwhelming user growth wasn't enough cause for concern, RBC's survey shows marketing departments are increasingly unwilling to advertise on the platform, and those that do feel they aren't getting a lot of bang for their buck.
Thirty per cent of respondents didn't spend any money advertising on Twitter, up five percentage points from February. A net 3 per cent of respondents think their return on investment has improved on the platform, down from a balance of opinion of 8 percentage points. As such, it's tough to see how the company commands much in the way of pricing power.
"When ranked against its peers, Twitter ranked fifth of seven in terms of ROI to advertisers, behind Google, Facebook, YouTube and LinkedIn, but ahead of Yahoo and AOL," the analyst wrote.
Most alarming for Twitter is that this isn't an industry-wide problem, but a company-specific one. Respondents indicated that "online avenues continue to rise in importance as marketing channels." Just not this avenue.
"Channel checks and our last four surveys (and particularly our most recent referenced above) don't provide convincing evidence that a substantial number of advertisers will commit meaningful dollars to TWTR," the analyst wrote.
If it's any solace to shareholders, Mr Mahaney still thinks the company is "a unique asset with a strong value proposition to core users."
Of the 41 analysts surveyed by Bloomberg, seven rate the stock a 'buy', seven others give it a 'sell', with the other 27 maintaining 'hold' ratings.